Looking Forward For Verizon Business, What Comes Next

And I guess mass your focus here is on five G. To me, it's so fascinating, not just because all the protesters around here are concerned that, you know, Bill Gates is using the vaccines to inject us with five G chips, but because it's gonna make I think business a lot more exciting and our personal lives also a little bit easier. Um, how do you think the most important UH leaps ahead will be will be met by the five G technology

that you're that you're spreading around. Good morning, Paul, and that, first of all, thank you for having me today. UM. Fight G UH will change the way we live as as as normal people and as employees. UH. And it's probably the first generation of wireless services that will be more focused or well bring more value to the enterprise, to the end consumers. UH. Fight G combined with edge computing will allow to define the business processes and the

engagement model with the consumer. Just think of the smart store, I think of a smart manufacturing, Think of telehealth, Think of the education. How can use the RBR to be more effective in the way you educate the people? UH. But the the art of the possible with five G is infinite. And actually what we're doing is to explore use cases on five G with our partners and with our customers in almost every industry. All right, mass, we'll give us a sense of timing. Here I see ads

from UH. You guys may tinteen your other competitors saying five gus here. I don't think it's here. Where are we in the rollout? Give us a sense of the timetable UH on the different flavors or five G five G at the C band, f G at the ultra white band. UH. Five G is here now in seventy one cities for the horizon, and we have the six while access in twenty three cities. Uh, what will we say is by five GM is now because really finding the business processes for enterprise will take time. You will

change the way they work. So that's why even if some use cases will be something you guys will be available in in in a few months, some will take a few quarters. But the time is now to work and define what technology could do and how technology could change at the way corporate works. What about the safety

of this? I mean, you know, I was joking a little bit at the top, but you've got um Robert Kennedy, whom the Globe and Mail called a super spreader of medical misinformation, who nonetheless is a big name and has warned about safety concerns around five G. Is there any that we should take seriously? Listen, we had a discussion about the safety every time we launched a new generation of wireless services. So we heard the same one TREG.

We heard the same offer G, and we heard we were here in the same offer G, and we will hear the same on six G. So listen, this the security is part of mount for us, and and you know wireless that will just bring the technology and value to the um beings. So no concern about security past when will I have to go out and buy a five G phone? When should I do that? Well, you should do that now has set on five phone or five G are available today in the market and and

will bring value. Think of the health for example, the ability to capture your your health data and your personal data in the in the middlesecond and to share uh this with with your position and with the expert. But

also think of the ability to consume media content. We had a view for the last Super Bowl where you could have a three D view, multiple view on the same screen using five G. So if you want to start having an experience in sports event but also have the ability to uh you know, be in the forefront on the use of technology for your personal house, than it's right time now to buy f I G. Front. Are you working on six G already? You mentioned it?

Is it already in the cards? Mainly so I think the art of the possible four five G is infinite that we think you will probably take several years so before you full exploit of the value of I G and what I G could bring to people and to enterprises. So, uh, we had in the forefront thinking the next technology, but we're not totally focused on the point i G and then bringing the value of i G to everyone. Masimo

takes so much for joining us. We appreciate it getting the update on all things on the telecom front with five G in particular. Massimo Passelli, Senior vice president of Global Enterprise for Verizon Business five G. The It's funny the telecom companies, they've spent billions of dollars on the spectrum. They will spend billions of dollars more on developing more of the infrastructure and the technology to support that spectrum.

And then uh, presumably as they rollout services and so on, we will be incentive to go out and buy new five G phones in one not so we'll see how that plays out over the next several months and years. Now, I want to get into the impact of the pandemic and while the reopening on travel and e commerce. Adobe does that with its Adobe Adobe Digital Economy Index. And here to talk about that is the director of Adobe Digital Insides, Taylor Shriner Um. Taylor, what kind of action

are are you seeing right now? Are we looking at it? Uh? A lift off so to speak in terms of the airlines. Well, broadly speaking, Matt we're seeing a turnaround across the board, but we're not out of the words yet. So, for instance, we are seeing that bookings are really double what they were before. People were starting to get back to needed People are showing a strong interest in travel, but if you compare today's bookings to what we were seeing in

March of twenty nineteen, we're still down. So while people are eager to travel and they have increasing competence in travel, we're not even back to twenty nineteen levels quite yet. Taylor, talk to us about some of the regional UH differences you may be seeing in your data. You know, Matt and I earlier we're talking about how successful it seems that, you know, big states like Texas and Florida have been reopening ahead of other parts of the region. Are you

seeing regional differences in terms of travel. We've seen a really strong UH bias for its southern and Midwestern states being willing to travel today. But on the other hand, if you look at the Northeast, where there's been a lot of reluctance to travel and they have sort of less travel than you would expect on average for the US,

they have a greater responsiveness to vaccines. So the more vaccines are all out, the faster folks in the Northeast are willing to travel, either because data themselves are vaccinated or because they have greater faith in travel with more people vaccinated. So if that's the case, UM, I would expect when more people go out, when more people eat at restaurants, from, more people take flights, from more people

hit the shops. Um, fewer people are sitting at home still using Amazon and other e commerce sites to get their goods. Am I mistaken. Uh, it's a fair assumption. But actually we have seen fifty growth year over year this last March, So people are really still used to making their purchases online and they're not telling us that they are showing any signs of going back to a pure in person retail world. They're absolutely going to restaurants.

You can see travel increasing, but we simultaneously see continued growth and basic things like grocery shopping online. Uh and well, uh we expect that to continue. Frankly, broadly speaking through the year. About outside the US tailor, you know when we go look at the UK or and mats based in Germany, are we seeing similar trends as it relates

to e commerce. Well, this is the first year that Adobe has released our insights on the whole global digital economy, or this is the first report rather, and frankly, there's some really big numbers out there. Last year, we saw about three point five trillion dollars in online commerce, and we're seeing that grow over the first quarter at thirty eight percent. So we see incredibly strong global e commerce growth.

And fact, we're predicting four point two trillion dollars UH in e commerce over the course of the year, which is, you know, bigger than than some major economies you'll see in in Europe. Yeah, way bigger, um. But I wonder how they compare to the US, I mean e commerce in the US versus a e commerce and the EU. Are they similar sizes or is the US far ahead

of what we see here in old Europe? Well, you know, e commerce global is really dominated by the United States and China in terms of where the overall dollars are getting expensed, where the overall money is getting expensed. But to your point, we really see UH strong growth in Europe.

The UK, for instance, saw sixty growth in the first quarter, so just stunning frankly, levels of e commerce growth that are continuing in Europe, and it's going to be different country by country with the varying payment systems and cultural differences. But globally we see incredibly strong growth and the US is at the moment on par with growth global growth, but there are a lot of countries that are going to get into this space and start to grow rapidly.

All right, So, teller, you're based in the Bay Area of San Francisco, right, Lucky, that's correct. All right, give us a sense of how how that area is kind of reopening here. What's the feeling there Again, we think about the northeast maybe being a little bit more conservative. Texas and Florida very aggressive in the reopening. What's it like where you are in California? Uh, well, I can just speak for my area. You know, you still see a lot of masks, You still see uh, you know,

a dearth of public transit, but people are out. I went to my first museum, uh this last weekend and you know, went over to see friends. So the the street level commerce is definitely growing and people are think you of traveling, looking to travel. Um, you know, one of the things we saw in the travel stats is that people are booking Thanksgiving and Christmas. Now, uh, that's the one area where bookings are above twenty nineteen levels

and you know, grademic totally in my area. That's that's what we see is that people are eager to travel and see friends and they're they're confident that by the fall that will be possible. Interesting, I'd like to get out there. Yeah, it's beautiful out there. West Coast is where it's at. Man's all right, Taylor, thanks so much for joining us. Taylor Shriner, he's a director of Adobe

Digital Insights. Uh, there out there Digital Economy Index showing some good growth Matt from you know, kind of the pre vaccine time frame in this pandemic. But still you know below you know, you're looking at airline flights and hotels still below from levels. But but in e commerce, um, they point out that the e commerce in March of this year broke records, adding almost another Black Friday in

online spending. So it's been huge. Yeah, it's been huge, and you know, you talk to the retail folks and they don't see that going back the market share that e commerce has, it's here to stay. Busy week this week for earnings. Also a busy week for economic data. Just today we had really strong consumer sentiment numbers come out, and that's good news. Tomorrow we have the Fed minutes and the press conference. Thursday, we get a GDP report

for the first quarter. Lots to dig into. Uh, We're fortunate to have Marcus Schomer, chief economists at pine Bridge Investments joining us. Marcus, I love to start with that GDP print that we're going to see. Third, stay, what do you expect to see? It should be a phenomenal number. And then also for the next quarter as well, how are you thinking about that? Oh? Yeah, the numbers look really good. For the for the entire summer, the GDP

number will be somewhere north of six percent probably. Um, we still don't know some of the some of the more variable parts like trade and inventories could be a little bit more negative. But we know that consumer spending, for example, is on track for a ninth percent quarter.

I mean, that's the phenomenal number, and it's likely with the with the check stop fully distributed in the first quarter, that some of that is spilling into Q two as well, and the numbers are probably going to stay like that through the summer, so we get consumer spending, well, get personal spending in UH income on Friday as well. Right, Um, and a lot of people have been talking about the savings rate was so strong and there's been so much extra at least at the top cash to throw out

into the system. Is that going to happen? Then? Do you expect a you know, um, a damn break in terms of spending. Um, well, we've we've seen it already. Right. We had a super strong retail sales number in January, and the only reason Q one is actually not better is because we had this really miserably cold February which depressed everything and people couldn't go out and spend it. And in parts they came back and with another check in that pocket went out on a spending spree again.

And I assume that, um, the April and May retail sales numbers will look really good as well, because you're right, it's not just the check itself, but it's also the money that's been accumulating over the last literally the last twelve months, as people couldn't go on vacation, couldn't couldn't go into the stores, and that has built up the savings rate. It's not really that people were saving, they just couldn't spend. That's a slightly different different way of

thinking about it. But some of that money will seep into the economy over the next couple of months, and I think that's why GDP goes will remain strong in Q two and probably spending it to you three as well. Question is what happens after that? Yeah, that's kind of where I wanted to go here. I mean, we're seeing a kind of a wide range of GDP forecasts out there on the street. For one, what's your call for the year of one, and then maybe also for next

year as well. Um, for this year we're we're around six percent, and next year we see a slowdown back to something around three and a half percent, a little bit of low consensus next year. I think the near term story is fairly clear, and the stimulus push is so strong that there's probably not a lot of disagreement where we where we are right now. But the disagreements the more interesting where we will be a year from now, because we're seeing more risks arising sort of on the horizon.

The pandemic is not over yet in the world. We won't see really a resumption of global growth for a while, the FETE is given up on the bond market and allowing bond to rise, and that takes away from the stimulus phisical policy is not talking about top fights and not just spending increases all the time. And then we have some political risks coming with the midterms next year. We have maybe another spending package coming soon from the

Biden administration. How important is it? Do we need it? No? No, we didn't even need the last one. I mean, we're way about what was necessarily close to the output gap and were so we're so in in such undiscovered country right now that we have we have no idea what the side effects of all this will be. For example, at some stage when there will be you know next year,

well there won't be those spending packages. There will be a huge decline in the way fiscal policy is boosting GDP growth, which could which could actually lead to much much lower goals that everybody is expecting, not because the economy is weak, but because the comparison from the stibulous

fuel to the maybe less stimulus fuel. Two And certainly, if the Republicans win the mid terms, there will be no stimus in twenty three, that that change from twenty to twenty three could be rather abrupt and could cause a lot of micro volatility and also some confusion. Some people may fear the economy is already two week recession

talk may start again. All this, all this access that we're seeing right now is creating a lot of volatility in the micro numbers, but also people will create volatility in the expectations for the future. Okay, Marcus, I'd love to just switch gears a little bit and talk about Europe. You know, where Matt is based in Germany, much tougher vaccine metrics. They're much you know, perhaps not the um the stimulus having the same impact as having here in

the US. What's your view of Europe and the economic recovery there. Well, I mean, right, the current situation that does not look good. And you know, if look at the p M I in disease that the beautifully tracked the difference in the US where services are surging now in Europe where services are stalled. UK s in the middle. You can see once you start vaccinating enough of your population, you can start to reopen and services come back in the same way as they're already back here in the US.

You know, the vaccinations are taking up in Europe as well. They're exploding right now. The supply is exploding. So given give them another months, given another six weeks, and they will be on the same track that we are on. So it's just a bit of a delay. The issue in Europe, in my mind, is more um, there's a there's a very different way of policy stimulus. They don't have the checks, they don't have the big packages, and

they have a lot of political groups coming up. In the next couple of months, we have elections in Germany and September, and the outcome of that is very unclear. And then something I've been worried about four years is in April of next year, twelve months from now, we have elections in France and that could be that could be a real nail binder if if the right wing candidate could give current president markrom you know, run for

his money. Marcus, where is oys Kirschen West? Casan is very close to Cologne, so um, very much in the western part of Germany. I'm just stalking Marcus here on the Bloomberg he was born. I'm sitting in Berlin and I'm a big germanophile. But I'd say that has hurt

that the lack of vaccines here has hurt me. And I will be interested to see if there's any scarring from that economically and also um to see what happens if the Greens actually take the cake in September, because they've really run up in the polls, even ahead of the C d U, C s U and our latest aggregate poll, which is totally shocking. We gotta get you back on, Marcus. It was a pleasure talking to you. Thanks for spending some time with us. Marcus show Er,

his chief economist at pine Bridge Investments. UM, and it was great to hear from someone who isn't just you know, your typical red blooded Americans, someone who has a little bit more interest in what's going on here in Germany. This is Bloomberg Time check in with Bloomberg Opinion were joined by opinion columnist Mark Gilbert, who's talking about the many reasons bankers love hedge funds, and Mark, I guess the main reason is the main reasons are you know,

millions or billions of dollars and fees. Right, money, It's all about money, It's all about the green backs, and hedge funds need the services that the investment banks can provide. They need them to lend the money into so they can leverage their bets. They need to borrow stocks often

when they go short in the market. There's a lot of specialist prime services that the investment banks provide to the hedge punk community, and they had a lot of money for it, all right, Mark, I u a full disclosure. I used to work at Credit Swiss back on those Credit Swiss First Boston, and I know what a huge business their prime brokerage businesses for them, as it is for other leading Wall Street firms. So I was interested to see the Credit Swiss is trimming it's prime broker's

exposure here post Arcticos. To me, this just feels like a knee jerk reaction and they're going to be back at some point, not in that arcti distant future. What do you what do you make of what's going on in Credit Swiss. Well, they've said that they're going to trim by thirty five billion dollars, which is about a third, So that shows you they've got a hundred billion dollars out there. To the hedge fund community. There are there are top five prime brokerage firm um. But you're probably right.

You know, once once they get over the shock of losing this SMAs money to Arcas, they'll probably be back into that business because it's so lucrative. There's so much money to be made in it. You know, last year the revenue you could make from providing new services to hedge funds and family officers was more than thirty billion dollars. It's grown at an average rate about eight percent years.

And given how hard it is to generate out for given how hard it is for headge funds to generate the returns they promised to investors in the current environments, their demand for leverage is only going to increase, and so the money you can make from providing those services as an investment bank is only going to head off. Yes, so Arcades and Greensville, right, they had a double whammy.

And I'm wondering if hedge funds out there, you know, if you're a woman or or a dude who has a big, risky trade and you need a prime brokerage services, you might not pick up the phone and call Credit Sweet, right, they might find it difficult to get that business back well. To be honest, half of the market is dominated by three firms Golden Sacks, Morgan Stanley and JP Morgan Um. And if you're a hedge fund, even especially if you're a bigger hedge funds, you probably have between three and

five prime brokers who you use for your business. You want to spread the risks around yourself as a hedge fund, so risks are not just one way. Plus you need them to be able to find the stocks to lend to you when you want to go short on a position. So the headsphons themselves probably use a roster of firms to gain the advantage that they're seeking by doing these kinds of trades, by doing these leverage trades in the market. So it's interesting that that market share from three companies

is just extraordinary. So do even the midsize investment banks did it? Did they even have prime brokerage businesses? When I think about it, maybe an RBC for example, high quality kind of mid tier investment bank. There's a lot of banks involved in the prime broker's business. I mean, Wells Fargo is in there in the in the top twn city groups, in the top twn bank of America's in the top ten. Um. There's there's a lot of crumbs to be had from from from what is a

very large table um. And again, just to repeat trendy sweet sis, a hundred billion dollars of exposure to to this industry um, which is you know, that shows you how important it is to the investment banks as a whole um. And that eight percent growth in revenue per year. Not many businesses have had that sort of steady growth aga as bad as secures. But also nobody wants to get burned again like credit sweez did. And I'm guessing they're turning out their kind of risk adversity across the board.

Is that naive of me mark or or are they going to get more risk averse. You've got to take on the risk to be able to do the business. But the big bank should be in the business of mentioning those risks adequately. Now there's been a winnowing over the past few years anyway, more business is flowing to the big affirms because a lot of this is down

to technology. A lot of it is down to the software that you have, a lot of it is down to your your ability to measure the risks across your own from the exposure that you have to the head front and the family office community. And that's why the

big banks have half of the market. They're just that much better at assessing these risks, They're that much better keeping track of what those exposures are like UM, and frankly that they're probably that much better at squeezing the extra revenue out of the business that can finance the kind of back office technology they need to be able to service these clients safely. I mean, let's not forget Gold and got out of this completely unscathed, completely unscathed.

UM and the top of the three in the risk management business. So yes, there are going to be increased risks in taken on these kinds of traits, but that should be the job of an investment bank to manage those risks, to make sure it's being adequately compensated, because there is no such things as a bad risk, there's only bad compensation and bad measurements. Risk is part of the business of of being an investment bank. Risk is

partly what headgephuns have made their money from. Being able to assess those risks is the core of that business. And yes, there's as a wake up call, but it's not gonna produce I don't think any pulling back from the most of the investment banking community. They will reassess their risks, they will probably want to run the ruler more firmly over the heads from the community and the trades that they're doing. But at the end of the day,

that's how you make money in this business. Mark, is there something just inherent in the structure of Credit Swiss that they just are not good risk managers because it seems like they are much more in the news than their peers. And I'm talking over a ten or twenty year period. I think every bank has got skeletons in its cupboard. You know, Deutsche Bank has had several of these blow ups. Ubs revealed today it lost almost the building dollars on the on the on the Arcadist blow up.

So there are always going to be a postiles that are always going to be sort of known and loans and unknown and nots. The trick is how you react to them, and the business is how you response to your own risk bofile going forward, and how you assess the risk to make sure you're adequately compensated the trades that you've got on your book mark. Yeah, that's relating. That kind of goes to that risk adjusted return. Matt,

you know you gotta, as Mark was suggesting. Yeah, I just wanted to say thanks as well to Mark Gilbert. There By the way, you can check out his piece and the work of his colleagues as well. If you have a Bloomberg in front of you, just type O, P I N GO. On the web, you can type Bloomberg dot com slash opinion. Um. And he also has his own ticker as we as we have mentioned, and and I Gilbert, and I Getbert for all. I don't

think I have my own ticker? Do you have? Do you have your own Tickerment For a brief moment, if you typed in my number, my name, sorry, um, you would get all the charts, so you would get t hashtag b TV go. Um. But someone intelligently removed that feature from the terminal. Thanks for listening to the Bloomberg Markets pod cast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Put

on fall Sweeney. I'm on Twitter at pt sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio